On value chains and data trains – and the media market to come
If you have not read it yet, Andy Atherton’s blog post from January 3rd is terrific. It perfectly frames the defining challenge for digital media, for 2011 certainly, and likely for the decade to come.
Simply put, advances in digital media technology, data mining, and data management, are proving transformative to the industry landscape. We’re facing a moment in time where a fairly well defined class of market intermediaries has both the know-how and technical advantage to:
- take advantage of data in performance marketing and inventory arbitrage at a scale not seen before, and
- challenge the fundamental economic model underpinning the industry, compromising consumer trust and eroding the margins of well established media principals
At the center of this debate is data – the who/what/when/why/where of a consumer’s digital signature. More specifically, the issue is one of data ownership. As Andy points out, quite correctly (and apologies for the length of the quote – it’s just that good):
Of all the entities in this (data) value chain – user, publisher, network or DSP, agency, advertiser – intuitively, which entities have the strongest claims to ownership of the valuable data generated by an online ad campaign? I would argue that the ends… the user and the advertiser… with other parties’ claims weakening dramatically from the ends to the middle. Who has more rights in a user’s behavioral data than that user? Who has more rights in an advertiser’s performance data than the advertiser who paid for the campaign? It’s patently obvious.
Of course, these data owners may choose to license some of their inherent rights to others in exchange for something of value. For example, a user may be OK with a publisher recording and using his browsing habits to deliver more targeted content or sell ads to subsidize free content. Or an advertiser might be OK with their agency recording and using ad performance data to improve the return of their campaigns over time.
However, in full knowledge and understanding, would the average user really be OK with an ad network or DSP, with whom the user has no relationship, constructing a comprehensive view of her life (anonymous or not) and selling those details to the highest bidder?
Publishers are getting wise to how their data is being misappropriated, and, more importantly, consumers are starting to get a little worried about the “creepy factor” inherent on online tracking and targeting. Publishers need a holistic solution to convert their raw data exhaust into a secure, portable, salable media asset. And Krux is doing its part to help. And it’s well established now that consumers need greater levels of transparency and trust from their favorite websites and marketers, as well as from the countless nameless/faceless companies they cross paths with on every web visit.
As the industry wrestles down the data issue, data ownership specifically (and hopefully without *too* much help from D.C.), we should approach it in as constructive manner as possible. We’re not building walls here, or carving off various claims to some vast uncharted terrain. Instead, it’s something more akin to completing the railroad across a continent to connect two oceans (media+data), an act that’s going to unleash a great wave of wealth creation and cultural change.
And as I dream of the day when that final ceremonial golden spike is hammered in, I come to my one point of diversion with Andy’s commentary. He states:
The long term solutions to the “privacy” issue will give data owners at each end of the value chain dramatically increased visibility of, control over and stake in how their data is used by players in the middle. And as these capabilities allow the data gravy train to begin charging for tickets, you’re going to see fewer riders.
This first part? I’m all the way there – visibility, control, and a stake in the action. Hallelujah. But as for fewer riders on that “data gravy train,” quite the opposite will prove to be true.
So, what happens when we have:
- transparency into who’s doing what with which data
- appropriate incentives for individual and enterprise data contributions
- carefully governed and licensed data use, and
- fair value exchange for all involved?
We have an entirely new media market. And arguably more riders on that data train. Fewer free riders, certainly, but for all the other folks along Andy’s data value chain? They’ll all be getting much more of what they want – visibility, assurance of fair use, reasonable compensation, and effective privacy protections.
And as for the free riders? Well, some of them will fall by the wayside surely, but many will simply live with narrower margins and reap the benefits of (re-)selling a higher quality product. Something tells me they have some wiggle room on their balance sheets given that many are currently starting out with what amounts to a zero-cost data asset today.
In this same vein, and in closing, I feel compelled to share what was perhaps the most valuable piece of market color I received at any trade show last year. A representative from a major agency holding company was responding to quite the lively debate on stage about “DSPs and agencies stealing publisher data.”
In short, her response was this: “I’m pretty sure we’re not stealing your data. And if any of our representatives are, I’m sorry. But believe me, if you could get that data to me efficiently and tell me what it’s really worth, I’d be the first in line to buy it.”
That was music to my ears. Fortunately for all involved, Krux was already hard at work laying the tracks.
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